Fletcher and Fletcher

[2011] FamCA 714

FAMILY COURT OF AUSTRALIA

FLETCHER & FLETCHER [2011] FamCA 714

FAMILY LAW – Interim financial hearing – Payment of monies for past legal expenses and arrears of periodic maintenance – Debts to be paid to Australian Taxation Office – Case management and preparation for complex financial hearing

Family Law Act 1975 (Cth)

APPLICANT: Mr Fletcher

RESPONDENT: Ms Fletcher

FILE NUMBER: MLC 2510 OF 2009

DATE DELIVERED: 7 September 2011

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Young J

HEARING DATE: 7 September 2011

REPRESENTATION

COUNSEL FOR THE APPLICANT: In Person

SOLICITOR FOR THE APPLICANT:

COUNSEL FOR THE RESPONDENT: Mr Parker

SOLICITOR FOR THE RESPONDENT: Lander & Rogers

ORDERS

IT IS ORDERED

1. THAT from the B bank home loan account (which currently has a credit facility of $329,000 approximately available) the following payments be made:

   (i)as and when they fall due on 22 August, September and October of this year the payment of the sum of $34,650 to the Australian Taxation Office;

   (ii)a payment to the husband’s former solicitors H Legal of $58,000 for the purposes described in the reasons for judgment;

   (iii)a payment of $30,000 to the wife by way of reduction of the alleged arrears of periodic spousal maintenance now said to be due and payable;  and

   (iv)by a payment to each of the husband and wife, or to their solicitors on their behalf, in the sum of $69,000.

2. THAT otherwise no further drawings beyond the available facility and surplus credit of the B bank home loan are to be made to or on behalf of either party pending further order and the commencement of the defended hearing on or about 20 October 2011.

3. THAT the extempore reasons for judgment be transcribed, be placed upon the Court file and be made available to both parties.

4. THAT on or before 12.00 noon Monday 17 October 2011 each of the husband and wife are to have filed and served on their behalf:

   (a)a concise balance sheet and financial summary of all assets, liabilities, financial resources and superannuation available for division in the defended proceedings;

   (b)a detailed statement of all orders sought in the defended hearing;

   (c)a document identifying all evidence upon which they rely or witnesses whom they intend to call or otherwise to cross examine in the defended hearing;

5. THAT the costs of and incidental to the hearing this day be reserved to the trial.

IT IS CERTIFIED

1. THAT pursuant to Rule 19.50 of the Family Law Rules this matter reasonably required the attendance of Solicitor appearing as Counsel for the wife.

   IT IS NOTED

A.THAT the husband has advised the Court that his business partners have sought independent legal advice and currently do not intend to intervene or be involved in the proceedings and he does not intend to call either of them as witnesses.

B.THAT the husband has advised the Court that he will ensure his equity in the C Street, Suburb D property remains intact and available as at the commencement of the defended hearing.

C.THAT all parties will ensure that all of the forensic accountants work diligently in the preparation of their report and thereafter in their conferences to discuss and resolve valuation(s) and other financial and commercial issues and the outcome of such conferences is to be reported to the Court as previously ordered.

IT IS NOTED that publication of this judgment under the pseudonym Fletcher & Fletcher has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 2510 of 2009

Mr Fletcher

Applicant

And

Ms Fletcher

Respondent

REASONS FOR JUDGMENT

1. In this matter the Court is hearing by submissions various applications that were first raised by the husband, as applicant in the interim proceedings, in his Application In a Case filed 8 April 2011.  Subsequently the orders were amended pursuant to a further Application filed 24 May 2011, and thereafter, and as a result of orders which I pronounced on 2 September 2011, the orders have been further amended pursuant to a document prepared by the husband and presented to the Court this day.  That further Amended Application has not as yet been filed, but it has formed the basis for submissions by the husband and the Response by the solicitor for the wife.

2. At the outset of the case it was agreed that leave be granted to the husband to file that Amended Application In a Case, and such leave is now granted.  In effect it replaces the earlier Application filed 8 April and the Amended Application filed 24 May of this year.  The husband has filed an affidavit on 24 May in support of his earlier Application.  I have read carefully that document and its annexures.  The husband has prepared but has not yet sworn and filed an affidavit in support of the further Amended Application now before the Court by leave.  That document has been read by both myself and Mr Parker.

3. It is a document which the husband has addressed from, but it is not sworn and it does not form part of the Court file.  What I intend to do is to have that affidavit marked as exhibit “H6”, so that it can remain upon the Court file but with the qualification that, the husband says for reasons of time and urgency, it was not sworn and filed, and I accordingly treat the document as, effectively, an aide-memoire upon which Mr Parker has made submissions and upon which I have asked questions.  The husband had also filed a substantial affidavit on 8 April 2011 with voluminous exhibits thereto and that document has been identified and referred to by Mr Parker as solicitor for the wife.  It is a document to which I have been taken and have made reference and therefore have read for the purposes of this urgent hearing this day.

4. The other affidavit filed by the husband on 24 May 2011 was from his accountant, Ms E, and that document has not featured significantly in this interim hearing, though as a background, all of the accounting undertakings are crucially important on a final hearing to all financial aspects of this case.  The wife, for her part, has prepared a Response to the earlier Application in a Case filed by the husband on 8 April 2011.  That Response was filed 10 May of this year and I have read that document and the orders there sought by the wife.

5. The wife then filed an affidavit of 10 May 2011, which I have read, and today has presented to the Court an unfiled affidavit, but sworn, of the wife responding to matters in issue this day.  As the document is sworn and as I have read the affidavit and it has been served upon the husband, it is appropriate that it now be filed by Mr Parker, and I give leave for the wife’s affidavit to be filed with the Court.  I require a sealed copy thereafter to be served upon the husband.  That summary therefore identifies the material before the Court save for various exhibits which have been handed to me during this hearing.

6. I say at the outset that I am now delivering an ex tempore judgment without leaving the Bench and based upon the documents which I have read, and in particular, the paragraphs thereof to which I have been directed.  I have had submissions from both the husband, who appears in person, and Mr Parker, solicitor, who appears for the wife.  I have listened carefully to those submissions, which I have balanced within the reasons that I am now delivering and the orders that I will now pronounce.  I have also had available on the Court file and have made brief reference to the Outline of Case documents filed by both the husband and wife for a hearing that was intended to commence in April of this year or thereafter.

7. The husband’s documents were, in fact, prepared for a Judicial Settlement Conference held on 27 May of this year.  In particular, the husband filed a statement of his assets and liabilities, inclusive of the corporate assets, and a summary of orders sought.  I have discussed that document briefly with the parties today, and I mention this matter at the outset to highlight the vast difference in the value of assets and acknowledged liabilities.  The husband would have it that the net assets are approximately $2,200,000 inclusive of superannuation.

8. His valuation of the business known as F Pty Ltd is approximately $1.6 million.  That must stand further scrutiny and an update in time and filing of financial information.  The contrast is that the wife also filed as at that date a Case Outline of documents and on her behalf it is said that the net assets inclusive of superannuation were approximately $6,730,000.  The business known as F Pty Ltd was then said to be valued at approximately $4.2 million.  I carefully make no findings upon either the assets or liabilities of the parties as they then were or as they now are.  That is a matter for trial, which currently is scheduled to commence before me as a defended hearing on or about Thursday, 20 October 2011.

9. I am again assured that it is a five day hearing, and I have informed both parties and their legal advisors that I have no more than five days.  Indeed, for the six weeks immediately following upon trial, I am not in the Melbourne Registry of the Court, and any judgment that is required will be written over the December/January period and delivered as soon as practicable thereafter.  However, that is a matter for another day. 

10. Returning then to the matters before me today, the commencing point can conveniently be that the former matrimonial home is a property in Suburb G that has a value of approximately $2.7 million.

11. Again, I make no findings that are binding on the parties or upon the Court at trial, and for the purposes of these ex tempore reasons for judgment, I will rely upon figures that are of approximate accuracy to the specific issues before me and which flow from the submissions that I have received and the documents that I have read. 

12. The current mortgage encumbering Suburb G is approximately $542,000.  Exhibit “H1” is a statement from B Bank, identified as a “rocket statement”.  It records that the total available funds are $435,461.  That is over and above the current home mortgage balance.

13. It is important to understand that these parties have through the marriage, and perhaps by careful financial planning and prudent decisions, paid more than the required monthly sum in reduction of their home mortgage.  It is for that reason that there is a surplus available to them within the structure of their home mortgage, though the amount is not the sum of $435,461 as per that exhibit.  What has occurred is that two payments have been made or authorised. 

14. The first is that, pursuant to orders on 25 May 2011, the parties were to draw down $12,500 each, a total of $25,000, for accounting expenses and for reasons that are unnecessary to explore today that further indebtedness of $25,000 is yet to be credited against the available credit facility within the home loan.

15. Likewise and of more recent times, the parties have agreed to the further sum of $81,000 being debited, those moneys being a quarterly tax payment due for the April – June quarter of this calendar year – that is, the last instalment for the financial year ended 30 June 2011.  That sum is yet to be adjusted against the mortgage and the agreed net effect is that there is a surplus of $329,000 now available, should it be appropriate, to draw down from that account.  Exhibit “H3” is a document from B bank dated 29 July 2011, seemingly only available to the husband, which is of some surprise, as the wife is a joint mortgagee and document should also have been sent to her.

16. In any event that records that the favourable interest rate currently enjoyed is to end within a few days, and thereafter, the new interest rate remains – still a very competitive 6.86 per cent per annum, and that will be the effective payment as at 8 October 2011.  In reality, what that means is the bank’s required mortgage payment will increase by a small sum.  That will have a flow-on effect to the husband’s payment of the mortgage pursuant to current orders.  Otherwise that matter is not before me for any order this day. 

17. By reference to the Amended Application before the Court, the husband seeks the credit balance of $329,000 in that mortgage account to be wholly applied to his benefit, and additionally seeks a further sum of approximately $47,000 to be otherwise found and applied to his benefit to satisfy the payments that he seeks in sub–paragraphs 1(b), (c), (d), and (e) of this document now before the Court.

18. In summary the husband seeks $25,000 to be paid to the wife as a reduction of the purported arrears of periodic spousal maintenance payments.  He seeks a sum of $57,951 to be paid to his former solicitors in payment of their current bill so that his file may be released for the purposes of this hearing or that he may then be free to engage the services of the partner of that firm, whom he has previously used.  He seeks a sum of $100,000 additionally to be advanced to him (alone) for the purposes of paying future legal accounting and barristers’ fees for trial.  He has indicated to the Court that he does desire legal representation and has nominated Mr Bartfeld QC, who previously has appeared for him without Junior.  Finally, a sum of $184,950 is sought, and that is more particularly explained by the attached note to the application.  In summary, it is:

    §$81,000 for the ATO quarterly instalment payment due on 22 October of this year, and

    §A total sum of $103,950, being each of agreed ATO purchase plan instalments of $34,650 due on the 22^nd day of August, September and October.

19. I need briefly deal with and explain those taxation payments.  I do not have the detailed evidence, but I have received submissions from the husband and from Mr Parker and it does seem that during the marriage and prior to separation and perhaps for the period after separation, these parties managed their B bank mortgage account by paying more than was required.  They effectively built up a surplus, which is the $329,000 standing to their available drawdown this day.  What the parties did was effectively to pay tax at a corporate rate on the income and drawings from the business to which they were entitled.

20. They have not paid the differential between the corporate tax rate and the personal tax rate, and upon the filing, lodgment and assessment by the Australian Taxation Office for the financial years ended 30 June 2008, 30 June 2009 and 30 June 2010, further tax assessments have now been assessed and require payment.  It is on that basis that a negotiated payment plan was entered into, with the first payment effective 22 August of this year.  Each month, the husband and wife must pay $34,650 to the Australian Taxation Office.  The first of those payments are now overdue, and in that regard an email from the accountant was produced at Court today and marked exhibit “H2”, raising the issue of the payment of the August instalment. 

21. I will separately now consider, and I have determined to make orders in respect of those three negotiated tax payments totalling $103,950 to be made monthly as and when they fall due, and not in an earlier lump sum by way of any prepayment.  The other outstanding debt to the Australian Taxation Office is the $81,000 payment due 22 October.  The parties are wholly responsible for that payment and the decision that I make today is not as to the accuracy or the requirement for payment thereof, but merely as to timing, and on all documents before me and having regard to all priorities, and having regard to the available funds and/or all other funds, as I am not limited to the mere surplus within the home account, I do not intend to order that payment to be made today.

22. If necessary the payment of that sum can be raised on the first day of trial, as this matter is listed to commence the five-day hearing before me two days prior to that payment date.  The next issue to which I turn is the payment of the H Legal legal fees which I will round out at $58,000 for the purposes of these reasons for judgment.  It is not disputed that the quantum may be reasonable, but that is not a matter upon which I give judgment today.  It is said to be the sum owing for the release of the files or for H Legal to find themselves in a position to recommence acting for the husband.

23. The husband has made it abundantly clear to the Court that his desire would be to obtain legal representation for such an important case.  I am aware, and Mr Parker has highlighted to the Court, the entry in “Ex4”, which is the general ledger account of the business F Pty Ltd, which showed that the husband did pay by way of a drawdown on loan $19,296 to H Legal on 28 February this year.  In the two weeks prior to that payment, he made substantial payments to both the independent financial expert at J Accountants, in the sum of almost $16,000, and otherwise a payment to K Partners of $17,600.

24. I have before me in that exhibit, and also in exhibit “H5”, the general ledger accounts of the business, which do highlight that for whatever reason, and I do not explore this issue in these ex tempore reasons for judgment, there was a freeze or otherwise a restraint upon the husband’s various drawings or access to his loan accounts as at approximately the end of March this year.  I do understand the submission of Mr Parker highlighting the fact that immediately was preceded by the filing of documents by the husband in this Court for the orders which are before me for determination this day.

25. As at 30 June 2010, the husband’s loan account was drawn down to $597,000.  there were further drawings in the 2010/11 financial year, and the loan account is now approximately $722,000;  that is, a further sum of $125,000 was drawn down as per the various exhibits now before the Court.  The husband has emphasised no drawings were made post 23 March of this year, and on the face of the documents that may be correct.  The background to the husband’s drawdown is a dispute as to his salary, which he asserts to be $297,000 per annum or thereabouts, and which Mr Parker has argued should more correctly be seen to be $370,000 per annum.  That is not a dispute that I intend to further comment upon or determine in these proceedings.

26. In the context of the various loan account drawings, Mr Parker referred the Court to the husband’s affidavit of 8 April 2011, and in particular, to paragraphs 39, 40 and 41 thereof, which I have read.  It is clear that there were Board Meetings which the husband and each of the other company directors, Mr L and Mr M, attended.  I have read the options considered by the Board.  It is a fact that the immediate repayment of $500,000 as required in sub-paragraph (b) of paragraph 40 of the husband’s affidavit has not materialised.  What, however, has seemingly occurred is that the Board option identified in sub-paragraph (i) thereof has materialised and there has been a cessation of advancing further personal loans to the husband.  Again, that may or may not be correct, and the final trial can investigate all matters if necessary.  The husband does conclude in paragraph 41 of that affidavit and says:

    Given that I am now precluded from drawing down further funds from my personal loan from the business, I do not have the means with which to maintain the current level of financial support that I am obliged to provide for and to the benefit of my wife pursuant to the interim maintenance orders.

27. That leads me then to identify the further sum pursuant to sub-paragraph 1(b) of the husband’s Application, and that is $25,000 be advanced to the wife, to be characterised at trial, by way of reduction of the current spousal maintenance debt.  The husband has before the Court, as and from 8 April, an application to discharge or at least substantially vary his maintenance payments to the wife, both by way of cash sum and by way of the payment of numerous outgoings, some of which he will maintain as per his application, and others, particularly in sub-paragraph (g) thereof, he seeks to vary or discharge.  They are all matters of some contest, to be heard and determined on the final hearing.

1. The preliminary issue now before me is whether there should be any cash sum paid to the wife by way of her current spousal maintenance arrears.  Mr Parker has argued for the whole payment of approximately $70,000.  The husband has proposed $25,000.  That is a matter that I must determine but, in any event, the balance of that dispute remains before the Court at the final hearing.  I carefully do not make any finding as to what is the current spousal maintenance arrears. 

2. The other matter which is of some significance in the determination of the payment of the H Legal bill or other expenses that may be incurred by the husband in having representation at trial is to have some general understanding of past orders made as to distribution of moneys or as to Barro orders.

3. Without a specific reading of the file and an itemisation of all past orders, there are security for costs/Barro orders made to the wife of approximately $130,000 in total.  To offset that, Mr Parker validly highlighted that the husband has access to drawings, and it is for that reason I have included reference within these reasons for judgment moneys drawn by the husband and paid to his then-solicitors and financial advisors.  Likewise, it is further said by the husband that from business drawdowns his total is approximately $175,000, and the wife has had moneys totalling $315,000.  He asserts a differential in favour of the wife of $140,000 which, when added to moneys ordered pursuant to security for costs application for payment of legal costs, bring a total discrepancy as between the husband and wife to a sum of $270,000.

4. Again, I carefully do not adjudicate that is the exact differential.  It is made more complicated by the necessity to carefully investigate the husband’s financial dealings with the business, his loan account and the financial benefits he has had therefrom.  Time does not permit in this interim hearing to be more particular and in any event I do not have further submissions before me to more carefully determine those amounts.  If there is any inaccuracy, it is a matter which I have warned the parties, and which I now repeat, can be adjusted at trial in the overall section 79 property and financial orders that I pronounce.

5. There has been some mention before me this day of the equity that the husband has in the property where he now resides in C Street, Suburb D.  That equity is said to be approximately $100,000.  It may be the property is somewhat complicated by other mortgages or drawing facilities, but nevertheless the husband has assured the Court in absolute terms, and I accept, that equity in that property will remain and will be before the Court at the final hearing.  On that basis and with the other assets in this case, I make no further injunctive order other than those already extant.

6. Near to the conclusion of the hearing, Mr Parker sought an opportunity to take instructions from his client.  As a result he then adopted a somewhat more pragmatic approach.  It was that the mortgage encumbering the matrimonial home at Suburb G can be accessed to the extent of its credit, but there should be no other drawdown over and above the available $329,000.  That was emphasised by him.  He then accepted that, as and when they fall due, the three monthly negotiated payments of $34,650 can now be accessed from that mortgage surplus.

7. Otherwise, he would then have the balance of available moneys – that is, approximately $226,000 – divided equally between the husband and wife, save that from the husband’s share, the arrears of spousal maintenance of approximately $60,000 be immediately paid to his client from the husband’s share.  That would have the effect of providing to the wife a sum of approximately $173,000, and the husband approximately $53,000.  I carefully balance that reconsidered and final position of the wife. 

8. The husband’s position remains first that moneys should be drawn down in excess of the available B bank equity – that is, over and above the $329,000 – and there should be further borrowings to secure all of the orders sought by the husband.

9. I will not extend borrowings over and above the $329,000 credit facility and to that extent the husband is unsuccessful in so persuading me.  There are many reasons, primarily, this is an interim hearing and it is a hearing on the basis of there remaining some uncertainty as to the valuation of the asset pool, the extent of liabilities, the extent of the husband’s drawdowns and what is otherwise available to him and in comparison to his two business partners.  I make no findings or conclusions on those aspects.  What I intend to do is to apportion in a manner that I consider just, equitable and appropriate, the available $329,000.

10. The first payment(s) to be made therefrom, as and when they fall due on each of 22 August, September and October this year, is for the sum of $34,650 on that day, and not a day later, to be paid to the Australian Taxation Office.  I have carefully balanced, as an overview, the moneys that this Court has already awarded to the parties by way of drawdowns or Barro orders, and there is somewhat of a discrepancy as between the husband and wife.  I am also conscious that the husband has the substantial financial and accounting knowledge of the business and the wife is at a disadvantage in that both her lawyers and her accountants do not have the husband instructing them as to the facts and financial affairs of the business and its past financial transactions.

11. Accordingly the wife’s legal and accounting fees are most likely to be more substantial, and reasonably so, than the husband’s.  However, the wife is legally represented, has an experienced solicitor at Court today, and has the services of Mr Sweeney on trial.  The husband desires legal representation.  Whatever access he may have had to the Court file to photocopy documents or otherwise to his solicitor’s file in past times, or to the business for all of its documents, it is not unreasonable that he have his solicitor’s file and his solicitor of choice.

12. I am particularly mindful that the wife asserts the pool of assets in this case is approximately $6 million; it may be less.  It will be no less than the husband asserts, and thus there must be some financial flexibility available to the trial Judge to make appropriate orders, and both parties have heard me say on many occasions that I can and will make final orders that I alone consider to be just and equitable.  Thus, I am not financially handcuffed by decisions I make today, and I do so with some level of flexibility. 

13. I intend to allow the sum of $58,000 to be paid to H Legal directly so that all past legal bills are cleared and that they are available to represent the husband, and more particularly, that if the husband wishes to obtain other solicitors, he may have the entirety of the file to take to whom he may so choose.

14. I now deal with the question of spousal maintenance.  I am satisfied that there are arrears of maintenance.  I do understand that the husband has an application to retrospectively challenge and presumably avoid payment of the spousal maintenance component thereof.  However, by his very Application today, he proposes $25,000 to be paid to the wife.  The wife seeks $60,000 or thereabouts.

15. What I intend to do, as a general position, is to next authorise a drawdown from B bank of $30,000 to be paid to the wife in reduction of spousal maintenance arrears.  That then leaves, after the three monthly tax payments and the sums of $58,000 to be paid to the husband and $30,000 to be paid to the wife, a sum of $138,000.  I intend to provide each of them with $69,000; that is, 50 per cent each of that amount.  I put no fetter on how it may be used, but the husband can certainly use those moneys towards legal representation.  The wife likewise can so do, or otherwise use it as appropriate.

16. In summary, therefore, from the $329,000 available drawdown, $103,000 will go to tax payments pursuant to the negotiated payment plan as and when they fall due;  $58,000 will immediately be paid to H Legal for the purposes identified in the application;  $30,000 will be paid to the wife as arrears of spousal maintenance, subject to reserving all rights to the husband to argue his issue before the Court in that regard;  the remaining $138,000 will be divided $69,000 to each of the parties, and those drawdowns can be effective immediately. 

17. I will have these ex tempore reasons for judgment transcribed, placed upon the court file and made available to both parties.

18. As to the defended hearing, I have already made orders for the filing of documents, trial affidavits and the like.  What I emphasise is that both parties are to make, file and serve on or before 12.00 noon on Monday 17 October their concise balance sheet statement of the asset pool, inclusive of all assets, liabilities, superannuation, financial resources and the like, together with a concise Summary of Argument and an update of the past Chronology if applicable.  I also require a concise and wholly accurate statement of the detailed orders to be sought in the trial, and that is to cover every issue that is to be argued before the Court.

I certify that the preceding forty-five (45) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Young delivered on 7 September 2011.

Associate: 

Date:  7 September 2011